Posts

What Mexican Tariffs Mean for Markets

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What’s in Today’s Report:

  • What Mexican Tariffs Mean for Markets (New Worst Case Scenario)
  • Two Leading Indicators of Market Contagion We’re Watching
  • Fed Policy Update
  • EIA/Oil Outlook

Futures are down 1% as President Trump announced tariffs against Mexican imports in response to the border crisis, while Chinese economic data missed expectations.

Trump announced a 5% tariff on Mexican imports in June  and rising each month there after until they hit 25%.

The March Chinese manufacturing PMI missed estimates at 49.4 vs. (E) 49.9 adding to global growth worries.

Today the key number is the Core PCE Price Index (E: 1.6% yoy) and if that number prints stronger than estimates, expectations for a Fed rate cut will drop further and given everything else happening today, markets could get ugly.  Conversely, a soft inflation number will increase calls for a rate cut, and stocks could steady on that news.

The other key event today is a speech by New York Fed President Williams, and markets will want to see if he has a dovish tone following the tariff announcement and recent soft data (if he does, that’s a positive).

Technical Update (Important Levels to Watch)

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What’s in Today’s Report:

  • Market Technical Update – Important Support and Resistance Levels To Watch
  • Have Stocks Fallen Too Far Too Fast?

Futures are enjoying a modest oversold bounce following a quiet night of news.

There was no new trade news or notable economic data overnight.

Sentiment has turned negative very quickly this week, despite the lack of any incremental bad news (so far) and this morning we’re seeing stocks attempt to bounce.

There are multiple economic reports today including (in order of importance):  Revised Q1 GDP (E: 3.0%), Jobless Claims (E: 215K), Pending Home Sales Index (E: 0.5%) and International Trade in Goods (E: -$71.9B).

But, the most important event of the day will be a speech by Fed Vice Chair Clarida at 12:00 p.m. ET, and the key here will be whether he sounds more open to a preventative rate cut, or whether he reaffirms the Fed’s “transitory” view of low inflation.  The former will be positive for stocks, the later will be negative.

Why Downside Risks Are Building in Stocks

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What’s in Today’s Report:

  • Why Downside Risks Are Building in Stocks
  • Weekly Market Preview
  • Weekly Economic Cheat Sheet (Friday is an important day)

Futures are modestly lower following a generally quiet three day weekend, as investors digest last week’s deterioration in economic data and U.S.-China trade relations.

Economic data was sparse overnight and the only notable report was German GfK Consumer Climate, which slightly missed expectations (10.1 vs. (E ) 10.4).  There was no material economic data out Monday.

On trade, Trump’s trip to Japan was a general non-event and there were no new developments (positive or negative) on U.S.-China trade.

Today we have a few housing numbers including Cash-Shiller HPI (E: 2.5% y/y) and FHFA HPI (E: 0.3% m/m) as well as Consumer Confidence (E: 129.8), but none of those should move markets materially.

Instead, focus will be on the news wires for any updates on U.S. – China trade and on support in the S&P 500 at 2800, which is becoming an increasingly important level.

The Bond Market Is Screaming For a Rate Cut

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What’s in Today’s Report:

  • Why The Bond Market Is Screaming For a Rate Cut

Futures are bouncing modestly following some hopeful comments by President Trump on U.S.-China trade.

Late yesterday President Trump made comments expressing optimism about an eventual U.S.-China trade deal that includes a solution for Huawei.  No specifics or new details were provided, however.

Brexit entered a new phase as PM May announced she will resign on June 7th.  But, until a “No Deal” becomes more likely, the global markets will continue ignore Brexit.

Today focus will be on Durable Goods Orders (E: -2.0%) and support at 2800 in the S&P 500.  Yesterday that support level held and that’s a key number to watch going forward, as a violation of 2800 could open up an “air pocket” in stocks.

Regarding Durable Goods, it’d be nice if the data was solid, but it’s an April number so it won’t reflect activity following the flare up of U.S.-China trade tensions, and the headline is likely to be negatively skewed by cancellations for the 737, which started last month.

A U.S.-China Tech War Too?

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What’s in Today’s Report:

  • Why the Trade War is Becoming a Tech War (And That’s Bad)
  • Brexit Update – Is a “No Deal” Brexit A Possibility (Yes)
  • EIA and Oil Update – Bearish Supply News

It’s an ugly morning as futures are down about one percent as markets digest disappointment from the week’s two big events, the FOMC Minutes and the global flash PMIs.

EU flash PMIs missed estimates at 51.6 vs. (E) 51.7 but EU and German manufacturing PMIs were especially weak (47.7 & 44.3) and that’s negative for global growth.

Yesterday’s FOMC Minutes were slightly hawkish and confirmed the Fed isn’t close to a rate cut right now.

Given the soft foreign data, the key report today is the flash Composite PMI (E: 52.4).  If that number is soft, it’ll further stoke worries about global growth and will be a negative for stocks.  Other reports today include Jobless Claims (E: 215K) and New Home Sales (E: 680K).

Bottom line, this market is facing several headwinds and support at 2800 is now important, but should likely hold unless hopes for a Trump/Xi meeting at the G-20 meeting are dashed, or U.S. growth begins to roll over.

Economic Breaker Panel Update

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What’s in Today’s Report:

  • Economic Breaker Panel: May Update

U.S. stock futures are flat as investors look ahead to today’s release of the FOMC Minutes while most overseas markets bounced o/n in sympathy with the U.S. rally yesterday, although trade tensions remain elevated.

A NYT article released late yesterday revealed a modest escalation in the “tech war” as the U.S. will likely add several Chinese surveillance companies to the same “blacklist” that Huawei is on. This is an incremental negative as the odds of the broader “trade war” being resolved in the near-term continue to fall amid escalations in the U.S.-China “tech war.”

There are no major economic reports today but the calendar is relatively busy with the EIA Petroleum Status Report  due out at 10:30 a.m. ET (oil has traded with a sluggish tone this week and a selloff could drag stocks lower), while the main focus of the session will be on the release of the FOMC Meeting Minutes at 2:00 p.m. ET.

Additionally, there are multiple Fed speakers on the calendar: Williams (10:00 a.m. ET), Bostic (10:10 a.m. ET), and Kaplan (10:15 a.m. ET), however it is unlikely any of them move markets ahead of the Minutes.

Trade Update: Good/Bad/Ugly

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What’s in Today’s Report:

  • Trade Update: Good/Bad/Ugly

Futures are rebounding with EU markets from yesterday’s sharp, tech-led losses thanks to some encouraging Huawei news o/n and a benign speech by Powell late Monday.

The U.S. announced some temporary exemptions will be issued for companies exporting to Huawei (mainly for existing products) which is helping ease some of yesterday’s elevated trade angst.

Overseas, there were no notable economic reports but the RBA cited risks to global growth in their most recent meeting minutes release, which pressured the aussie.

Looking into today’s U.S. session, focus will largely remain on the trade war and specifically any further information on the Huawei exemptions for U.S. exporters.

There are a few other potential catalysts however, including one economic report: Existing Home Sales (E: 5.37M) and a few Fed speakers: Bostic (7:50 a.m. ET), Evans (10:45 a.m. ET), and Rosengren (12:00 p.m. ET) but none of these are expected to materially move markets amid the most recent trade war developments.

Updated Market Outlook

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What’s in Today’s Report:

  • Updated Market Outlook (Post U.S./China Trade Breakdown)
  • Weekly Market Preview
  • Weekly Economic Cheat Sheet

Futures are modestly lower following an uneventful weekend as investors digest Friday’s negative trade headline (that U.S./China trade discussions have been suspended).

On trade, there was no new news over the weekend, but several U.S. tech firms have stopped conducting business with Huawei, per the Commerce Department decision, and that’s just further escalating the U.S./China trade conflict.

Economically, there were no market moving reports (Japanese GDP was stronger than estimates but the details weren’t great).

There are no economic reports today but there are multiple Fed speakers, most important of which is Powell (7:00 p.m. ET), although he’s not expected to make extensive comments on policy.  Other Fed speakers today include:  Bostic (8:50 a.m. ET), Harker (9:30 a.m. ET), Williams & Clarida (1:00 p.m. ET).

Given the lack of data and important Fed speak, trade headlines should drive markets today and any formal retaliation by China for the Huawei decision will make the trade situation worse, and likely pressure stocks.

 

Another Update From Dr. Copper (It’s Been Right)

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What’s in Today’s Report:

  • Another Update From Dr. Copper (It’s Been Right)

Futures are modestly weaker following disappointing Chinese economic data.  Nothing new happened over night with U.S./China trade.

Chinese Retail Sales (7.2% vs. (E) 8.6%), Fixed Asset Investment (6.1% vs. (E) 6.4%) and Industrial Production (5.4% vs. (E) 6.3%) all missed estimates, implying the Chinese economic recovery might not be as solid as thought.

Today focus will shift back to economic data.  The Chinese data was underwhelming and that will put more pressure on today’s U.S. data to reassure markets about growth.

The key reports today (in order of importance) are:  Retail Sales (E: 0.2%), Empire State Manufacturing Survey (E: 9.0), Industrial Production (E: 0.0%), Housing Market Index (E: 64).  Again, “bad” numbers from these reports that makes the Fed more dovish may cause a temporary bounce in stocks, but that’s not good for stocks in the medium/longer term.

Finally, there are two Fed Speakers, Quarles (9:30 a.m. ET) and Barkin (1:00 p.m. ET) but neither should move markets.

Trade War Update (After Tariff Increases)

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What’s in Today’s Report:

  • Tariff/Trade War Update

Futures are marginally weaker as the U.S. increased tariffs on Chinese imports, as expected.

Positively, the trade talks will continue today, and the consensus market outlook remains that a deal does get done, likely in the next few weeks.

Away from trade, economic data was solid.  Japanese Household Spending, British GDP and UK Industrial Production all beat estimates.

Today most of us will spend the day watching for any trade related headlines, and there are likely to be plenty.  But, barring a total breakdown in negotiations, trade shouldn’t be too big of a negative on markets today.

Away from trade, we also get the most important economic data point of the week:  CPI (E: 0.4%).  PPI was more firm than it seemed, and if CPI is also firm then that will reduce the possibility of a preventative Fed rate cut, which will be another headwind on stocks.  Finally, there are multiple Fed speakers today: Brainard (8:30 a.m. ET), Bostic (9:05 a.m. ET), Williams (10:00 a.m. ET) but none should move markets.